Money

Joe Kraus says It’s a great time to be an entrepreneur

In this post he asks why it cost $3m to launch Excite and only $100k to launch JotSpot

His conclusion is that it boils down to the following 4 things:

• Hardware is 100X cheaper
• Infrastructure software is free
• Access to Global Labor Markets
• Search Engine Marketing changes everything

I agree with these, but would also like to add these to the equation:

• Simpler services are more successful
• Big is no longer cool
• Better frameworks

Simpler services are more successful

Most new successful services are very simple in reality. Just look at Flickr, Del.icio.us and Backpack. They are all intentionally simple services that do one thing and do it well.

This allows you to focus your development and sales efforts and you need less focus on the foolishnes that I remember was rampant when I was at AltaVista during 1996.

Big is no longer cool

Burn rate used to be cool. Founders of startups used to blag about their monthly increase in staff size (read burn rate). There is no need for this and most people have got the gospel. Most people sucn has 37Signals are infact bragging about how much they can get done on a team of 4 people.

This wanting to be big is actually also one of my Bootstrapping Anti Patterns

Better frameworks

It is a lot easier and quicker now to bring a new service from concept to launch. One of the biggest things helping this is the emergence of new practical web frameworks like Ruby on Rails . This allows single person or tiny teams to incredible things in very short time.

Just look at the Real World Usage in Rails page to see what has happened in less than a year of Rails.

There are other similar frameworks where you could do similar things quickly, but really Rails is one of those economy changing tools that is and will cause a lot of turmoil in the world of web applications.

Conclusion

Joe says that there will be a lot more companies founded on $100k. This is true, but there will be even more self funded bootstrapping startups out there competing with their angel funded breathren.

So when I bought my powerbook in March I decided to stick with the base 512mb. I figured how bad could it be? It’s not like I’m running any Java IDE’s or anything that normally sucks up memory.

Besides there is a magic tax write off limit I would hit here in Denmark if I didn’t upgrade the memory.

Well, when you have textmate, safari, firefox, newsfire, marsedit, yoursql, itunes as well as a webrick dev session open at the time on a 512 meg powerbook you find yourself doing a lot of swapping. It was a pain in the ass (I’m the boss here I do not need to insert **). Even the cool instant startup from sleep was taking ages.

So I did the right thing and ordered 512mb from Crucial so I could have it as part of this quarters VAT return. Finally got it yesterday and what a difference. I know everyone probably already knew this, but it is so much faster. The memory also was nearly 20 euro cheaper than it was when I looked at it in March. Actually my own memory might be wrong, but thats what I think anyway.

[ Just added this to my new series on Antipatterns ]

A mistake I myself have made as well as many other smalltime entrepreneurs is that we have wanted to appear like a business to early. Symptoms of this are things like:

• Incorporating
• Renting office space
• Buying a fax machine (You know a business needs one)
• Fancy stationary
• Fancy graphic designers
• Multiple fault tolerant high availability servers
• Human resources officer (If you’re a startup and have one these you really are on the slippery slope)
• etc. etc.

These are all fine at the correct phase of your business, but don’t waste these huge money suckers without an actual need.

I for example have rented a server which hasn’t really been in use since february. That is ¢49 out the door every month. Stupid really. Now is when I need it and I could have saved ¢147.

I also just bought business cards from VistaPrint because I’m going to Reboot in a couple of weeks and it’s handy to have at such events, but if not it would have been a waste of money at this time.

If you think about it one of the traps that leads to big businessitis is playing a business. This is often necessary if you want to attract venture capital, after all they want to know that you are serious and have things like a fax or an hr department. But really, I think the businesses who really succeed are the ones that focus on their business model and not how they appear outwards.